What Would You Do?
Imagine that you are the head of a company that manufactures secondary wood products for the construction industry.Recently, there have been many reports of a plywood subflooring product that has been failing in a number of commercial locations resulting in several complaints about ruined floor coverings and, in one instance, partial collapse of a third floor, which injured three people.Your head of research and development has asked you to stop selling the product and wants to run tests on the product to determine the problem.However, third-quarter earnings reports are due out in two weeks and public knowledge of problems with a lucrative product may delay the financing of the company's expansion plans and also lower stock price.Your dilemma: Do you delay or refuse the product research, thereby enhancing the expansion plans but risking other damage and public safety, or do you immediately stop sales of the product and run the necessary tests, thereby risking the expansion plans?
-Refer to What Would You Do? (Scenario).Friedman would argue that if you decided to make any decision other than what is in the best interest of the shareholders, which of the following is likely to occur?
A)increased financial return to shareholders
B)increased profits and dividends
C)increased employee wages and benefits
D)increased consumer prices
E)increased sales

Question

Quizplus · Accepted Answer

Friedman's philosophy emphasizes the primary responsibility of businesses to their shareholders, suggesting that decisions not aligned with shareholders' interests could lead to increased costs, such as higher consumer prices, to offset potential financial impacts.